Options – Creating Synthetic Positions

These payoff diagrams show how to create synthetic option or underlying positions through combining calls, puts, and the underlying.

A long call and a short put position is similar to being long a stock. A long put and a short call position is similar to being short a stock. A long stock and a long put position is similar to being long a call option. A long call and a short stock position is similar to being long a put option.

Call – Put = Long Stock

Put – Call = Short Stock

Stock + Put = Call

Call – Stock = Put